Brittany Callihan sold stock (basis of $184,000) to her son, Ridge, for $160,000, the fair market value.

a. What are the tax consequences to Brittany?

Brittany will have a what $ amount____ which is a (gain) or (loss) that is (deductible) or (not deductible) or (recognized as income)

.

b. What are the tax consequences to Ridge if he later sells the stock for $190,000?

(A realized and recognized gain of $30,000) or (A realized gain of $30,000, with $0 recognized as a gain for tax purposes.) or (A realized gain of $30,000, with $6,000 recognized as a gain for tax purposes.) or (There is no realized or recognized gain to Ridge.)

What are the tax consequences to Ridge if he later sells the stock for $152,000?

(A recognized and realized gain of $8,000.) or (A recognized and realized loss of $8,000.) or (A recognized loss of $8,000, none of which is realized for tax purposes.) or (There is no recognized or realized loss to Ridge.)

What are the tax consequences to Ridge if he later sells the stock for $174,000?

(A recognized and realized gain of $14,000.) or (A recognized gain of $14,000, with $10,000 recognized for tax purposes.) or (There is no recognized gain to Ridge and the $10,000 of unrecognized loss is permanently lost.) or (There is no recognized or realized gain to Ridge.)

c. Complete the letter to Brittany in which you inform her of the tax consequences if she sells the stock to Ridge for $160,000. Explain how a sales transaction could be structured that would produce better tax consequences for her.